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Sunday November 19, 2017

Five more ways to keep shoppers grilling

Of the 75 percent of American adults who own a grill or smoker, according to Virginia's Hearth, Patio & Barbecue Association, the trade group for grill manufacturers, 61 percent of them will use their grill or smoker year-round. If you're tapering off the grill promotions after Labor Day, you're missing out on a significant and growing segment, says the association. Need more evidence?

Why aren't meat prices behaving as expected?

"Why is beef demand growing as per-capita income shrinks?" BEEF magazine editor Wes Ishmael pondered in a Jan. 2014 column written to cattle ranchers. The gap between rich and poor has widened, income growth at the bottom is stalled, and beef prices are leading nagging food inflation. "None of that should be positive news for commodity products with a high price compared to substitutes;" he noted, "beef vs. chicken and pork in this case." Yet Ishmael is surprised to point out that annual retail demand for beef has continued to defy expectations and to rise during those developments. "There’s no simple explanation for this paradox between dwindling domestic per-capita wealth overall in tandem with growing demand for pricier beef."

Now, a study scheduled for publication in the journal Applied Economic Perspectives and Policy by Oklahoma State ag economist Jayson Lusk and Kansas State ag economist Glynn Tonsor has attempted to explain and quantify that paradox.

What ever happened to the wheat shortage?

As little as two short months ago, USDA was reporting farmers nationwide were devoting the fewest number of acres to wheat in decades. The agency expected all wheat plantings, including all varieties, to total only 49.6 million acres, down a surprising 9 percent from 2015 and the lowest acreage since 1970. Driven by any number of factors, including the farm-program dictates, relative crop prices and higher demand for corn heightened by ethanol usage, this former grand-daddy of High Plains crops was being slowly driven out of the average farmer's crop mix. Anticipating possible resulting shortages, the commodity futures price for wheat shot up, as buyers hedged against the possibility that tight supplies resulting from such low plantings would cause prices later in the year to explode.

These developments came fresh on the minds of commodity traders remembering just six years ago, when Russian drought and worries about a global shortage of the grain revived fears of a repeat of 2008, when low supplies of the grain led to riots in several countries, pusing prices up at their fastest rate in half a century.

Given the smaller area planted to wheat, U.S. wheat production was expected to fall this year, as was the world's production through 2017. The spring forecast from the International Grains Councilpredicted world wheat production for 2016 and 2017 to be down 3 percent from a record 734 million metric tons in 2015 and 2016.

Now, fast-forward to July 4, considered the traditional start of the wheat harvest in Nebraska, and the state's farmers are awash in the grain.

The Agriculture Department estimates the average yield for the new crop of winter wheat in the United States is now projected to be record high at 50.5 million bushels. Production is projected at 1.506 billion bushels despite an 8-percent year-to-year decline in area harvested. The improved outlook for winter wheat lifts aggregate wheat production for 2016/17 to 2,077 million bushels, an increase of nearly 80 million bushels from the May projection and an increase of 25 million bushels over the 2015/16 crop. The Nebraska Wheat Board thinks this year's harvest should be a good one. Initial outlooks show it many be better than in the last few years, but they don't want to expect too much before the numbers start coming in. Increased export prospects in the European Union and Russia this month also reflect changes in those countries’ wheat output. The projected increase in world wheat production is slightly higher than consumption growth, leaving record-level stocks virtually unchanged.

The bottom line is farmers are again reacting to the highs and lows of the commodities markets in supplying the food chain, and wheat is perrenially unattractive. The all-wheat season average price for 2015/16 as of June remains at $4.90 per bushel. June is the first month in the wheat marketing year and thus the 2016/17 wheat marketing year is officially underway. The preliminary price reported in last month’s World Agricultural Supply and Demand Estimates is lowered by 10 cents this month to a midpoint of $4 per bushel. Prices on the low and high end of the range are $3.60 and $4.40 per bushel, respectively. Wheat prices have not been projected this low since the 2005/06 marketing year; at present the market value of the 2016/17 crop is nearly 2 billion less than for 2015/16.

As Montana wheat farmer Jim Mertens tells the onlinge magazine Narratively, that $4.50 per bushel he's sold his wheat crop for the last two years is a bit less than he was selling it for in high school back in the 1970s.

Meanwhile, a new feature-length Austrailain documentary featuring Virginia farmer Joel Salatin and food activist Vandana Shiva doesn't stand to help spur demand for wheat-based products. The film, What's with Wheat?, paints demon wheat as the underlying cause of numerous ills, from diabetes to leaky gut syndrome to celiac disease and gluten intolerance to industrial agriculture’s vices.

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Are we setting up for a soybean shortage?

The weather in South America this cropping season has been brutal, leading to what one commodities watcher called “massive reduction" in the continent's crop size for both corn and soybeans. Flooding contributed to both widespread declines in soybean production and shipping delays on what was produced in Argentina, even as drought in Brazil hurt production of both staple crops. South-American commodities expert Michael Cordonnierin, noting Brazil in mid-July was down to less than one week's supply, raised the possibility that country, the worlds second largest soybean producer, could actually run out of soybeans.

Meanwhile, with global demand, led by China, unabated, the tight supplies in the southern hemisphere could indirectly lead to a shortage here and around the world, as U.S. exports increase to fill the South American shortfall.

The world soybean supply is important to grocers because in addition to whole soybean food products and refined soybean oil products, like cookies, snack foods, cooking oils and margarine, soybeans are used in a wide variety of food, pharmaceutical and cosmetic products. They are also the second most common ingredient in U.S. animal feeds.

USDA reported in mid July the 2015-2016 U.S. export forecast is raised nearly 1 million tons, on top of last month’s 500,000-ton rise, currently standing at 48.9 million tons. In addition, the export forecast for 2016 and 2017 is raised to a record 52.3 million, 4 percent above the previous record set in 2014 and 2015.

South America is gobbling up all the soybeans

Those rocketing export levels will cut into the season-ending stockpiles of soybeans in this country, holding up prices above those observed in 2015. U.S. export bids in June averaged up $39 per ton from last month, at $444 per ton, the highest level in nearly 2 years.

However, it's important to note more than 66 million tons of soybeans in ending stocks are still available worldwide. That's down by 16 percent from 2014-2015's high of 78.4 million, but still higher than the low of 55.4 million in 2012-2013. So "shortage" may be premature. USDA's latest report on crop progress in this country shows the soybean crop in the states representing 95 percent of all production was 13 percent ahead of last year and 15 percent ahead of the 5-year average. Overall, 71 percent of the U.S. soybean crop was reported in good to excellent condition, unchanged from the week before but 15 percent above the same time last year.

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It's time for summer grilling. Here's a commodity outlook

Just ahead of the kickoff to this year's summer grilling season, the U.S. Department of Agriculture published red-meat and poultry production forecasts for 2017 predicting production of all animal protein components is expected to increase next year vs. this year. Overall, total red meat production should rise 3.3 percent, total poultry will grow 2.5 percent, and the total for both categories combined should rise 2.9 percent.

All meat production is expected to rise


Now's the time to take advantage of beef featuring through June and July. USDA reports cattle prices are moving lower and supplies of cattle remain large. Given a larger 2015 calf crop and expectations of increases in the 2016 calf crop, the number of cattle going into feedlots in preparation for market in 2016 and early 2017 are expected to be higher. Those larger slaughter-cattle supplies and higher average carcass weights add up to more beef production for 2017—4 percent more than 2016, at a forecast 25.8 billion pounds. Those increasing beef supplies have kept wholesale beef prices under pressure. Weak demand for ground beef products and the popular middle-meat grilling items amid expanding weekly beef production remain a negative force. USDA reports the Choice cutout price for the week ending May 6 was $205.72 per hundred pounds, down $9.79 from the previous week and $50.89 lower than last year. The Select cutout was reported at $196.49 per hundred, down $9.82 from the previous week and $48.40 below last year. The current fundamentals of the beef complex are the exact opposite of this time last year, with lower prices and higher production.

Beef price trends



Larger hog supplies will drive 2017 pork production almost 3 percent above volumes in 2016, according to USDA. Retail pork prices are likely to be lower as a result. They will be pressured by larger animal-protein supplies, not only of pork products, but of meats that compete with pork; beef and poultry production are also expected to increase in 2017. The ERS retail pork composite is expected to average in the mid-$3 region next year, down about 4 percent from the retail composite forecast for 2016. The wholesale value of January-to-April production averaged $76.20 per hundred pounds, almost 5 percent more than in the same period a year ago. In effect, this year, the wholesale market valued roughly the same volume of pork 5 percent higher than a year ago, suggesting that wholesale demand increased.

Pork price trends



First-quarter broiler production was slightly below forecast, and outlying forecasts were left unchanged. Broiler stock forecasts were reduced on lower-than-expected data, and whole-broiler price forecasts were raised slightly on stronger price trends. USDA reports April wholesale prices for broiler meat were mostly trending up, led by leg quarters, but they remained relatively low. The national composite price for whole birds at wholesale reached its seasonal low during February and has increased fairly consistently since then. With a relatively strong increase in prices during April and May, the whole-broiler price forecast was raised for the rest of 2016, with an annual average of $0.86 to $0.90 per pound. The 2017 price was forecast to average $0.84 to $0.91 per pound, as expected growth in exports partly offsets the effects of increased production.

Poultry price trends



First-quarter Choice slaughter lamb price was $133.33 per hundred pounds, almost $14 lower than the same time last year. Prices are expected to continue to remain below year-earlier levels for the rest of 2016, primarily due to the expected increase in the supply of lamb on the market. Second-quarter commercial production is also forecast at 38 million pounds. Both the first and second quarter commercial lamb production was below last year’s 39 million pounds when Easter and Passover occurred around the same time in the second quarter. However, overall 2016 production is expected to be slightly higher than last year.

Lamb price trends

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Supported by the Nebraska Corn Board

The Nebraska Corn Board, on behalf of 23,000 corn farmers in Nebraska, invests in market development, research, promotion and education of corn and value-added products. The board aims to work closely with the farmer-to-consumer food chain, to educate everyone about the role corn has in our everyday healthy lives. The Nebraska Corn Board is proud to sponsor the Farmer Goes to Market program to help bring its mission of expanding demand and value of Nebraska corn to the consumer, through the strongest touch point in that chain: the Nebraska retail grocer.

Supported by the Nebraska Farm Bureau

The farm and ranch families represented by Nebraska Farm Bureau are proud sponsors of the Farmer Goes to Market program. We take great pride in supporting Nebraska's agricultural foundation. A key part of that effort is to make sure we produce safe and affordable food. This newsletter is an important part of our effort to connect the two most important parts of the food chain -- the farmer and the grocer -- with the goal of increasing consumer awareness and information about how their food is raised in Nebraska.

In patnership with the Nebraska Grocery Industry Association

The Nebraska Grocery Industry Association was formed in 1903 by a group of Omaha grocery store owners, wholesalers and vendors to allow them to promote independent food merchants and members of the food industry, and to promote education and cooperation among its membership. NGIA continues to represent grocery store owners and operators, along with wholesalers and vendors located throughout Nebraska, by promoting their success through proactive government relations, innovative solutions and quality services. NGIA offers efficient and economical programs. NGIA also lobbies on both a state and national level, ensuring that the voice of the food industry in Nebraska is heard by our representatives.

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